Banks to get funds for loan program

• Canada’s banks are likely to get tens of millions of dollars for managing the government’s loan program designed to get money in the hands of small businesses.

The government launched the Canada Emergency Business Account ( CEBA) program on April 9, allowing businesses to apply for up to $ 40,000 in interest- free, government- backed loans through their banks. If businesses manage to pay 75 per cent of the loan back by Dec. 31, 2022, the remaining 25 per cent will be forgiven.

Businesses also had to have a payroll of between $ 20,000 and $ 1.5 million to qualify for the program.

All of Canada’s major banks have programs up and running to help customers apply for the program and to date $15.3 billion has been extended to businesses across the country.

Under the previously undisclosed terms of the arrangement with banks, the financial institutions will get 0.4 per cent of any outstanding balances in the program per year. If for example, the $ 15.3 billion that has been paid was still outstanding at the end of the first year, banks would receive just over $60 million.

The program was part of a host of support efforts for small businesses, which has also included the wage subsidy program and an initiative for rent relief that was announced last week.

Anna Arneson, a spokesperson for the Ministry of Finance, said the fee is intended to cover the banks’ cost administering the program including keeping clients updated on balances.

“The fee is intended to reflect the cost of service of the financial institutions providing the loan, for the duration of the loan’s lifetime, in a manner similar to how a financial institution would treat loans that it underwrote,” she said in an email. “It is not intended to include a profit margin for the financial institutions.”

She said the government is also doing an independent review of the program and if the costs to the bank are lower than initially estimated their fee can be reduced.

NDP MP Gord Johns said Canada’s banks could have taken on this program without charging the government.

“It would have been a generous offer if they said we are going to administer it, this is something we can do,” he said. “The big banks haven’t come to the table and they need to.”